What is meant by principle of materiality
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The materiality principle. The materiality principle states that an accounting standard can be ignored if the net impact of doing so has such a small impact on the financial statements that a reader of the financial statements would not be misled.
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An accounting concept according to which all relatively important and relevant items,i.e., items , the knowledge of which might influence the decisions of the user of the financial statements are discloses in the financial statements.
Whether something should be disclosed or not in the financial statements will depend on whether it is material or not.
Materiality depends on the amount involved in the transactions.
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